How to calculate your service fee?
To calculate your service fee, estimate your costs (expenses, taxes), your desired net income, and non-billable time. Divide the total by annual billable hours, then adjust based on market rates and perceived value.
Good to know :
This answer helps you understand a topic or make an estimate, but it is not a substitute for professional advice. For any important decision regarding your health, finances, rights, safety or administrative procedures, please consult an official source or a qualified specialist.
Explanation
Key steps to set your service fee
- Define your desired annual net income: This is what you want to earn personally after taxes.
- List your annual fixed and variable expenses: Rent, insurance, software, equipment, marketing, etc.
- Estimate your social contributions and taxes: Consider your status (freelancer, company, etc.) and applicable rates.
- Calculate your billable working time: Deduct holidays, public holidays, sick leave, training, prospecting, administration from your total working time.
- Determine your minimum gross hourly rate: (Desired net income + Expenses + Taxes & Contributions) / Billable hours.
- Analyze the market and perceived value: Compare your rate with competitors and adjust based on your expertise and the value you provide.
- Include a safety margin: Plan a small margin for unforeseen events or development.
Formula / method
Gross hourly rate = (Desired annual net income + Annual expenses + Annual taxes & contributions) / Annual billable hours
Concrete example
A freelancer wants €30,000 net/year. They have €5,000 in annual expenses and estimate €10,000 in contributions and taxes. They work 220 days/year at 7 h/day, but only 60% of their time is billable.
Billable hours calculation:
220 days × 7 h × 60% = 924 billable hours
Minimum hourly rate calculation:
(€30,000 + €5,000 + €10,000) ÷ 924 h = €48.70/h
Their minimum hourly rate is therefore about €48.70/hour. In practice, they should probably round above that to keep a safety margin, absorb unexpected costs and avoid working at break-even.
Common mistake
Do not underestimate your expenses and non-billable time. A rate that is too low can harm the viability of your business and your credibility. A rate that is too high without justification can lead to losing clients.
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